Dispatches from the space race

Government predicts price falls next year

Yesterday’s report from the Office of Budgetary Responsibility predicted that house prices would end 2010 6.7% up on last year, but said it expects values to fall by 3.1% next year.

This downgrades market expectations from the 1.6% increase the OBR forecast earlier in the year.

It expects house prices to rise by 1.1% in 2012, by 3.7% in 2013 and by 4.3% in both 2014 and 2015 but these increases are also lower that previous expectations.

OBR house price forecast

In a related comment on the relationship between the housing market and tax receipts the report notes that:

The change in the judgments on both residential property prices and transactions in the November forecast have had a marked effect on the stamp duty land tax (SDLT) forecast.

The SDLT forecast is around £2 billion below the OBR’s June projection by 2015-16.

With the median of independent forecasts suggesting a modest decline in house prices in the year to the final quarter of 2011, the house price level is around 8 per cent lower than previously assumed by the end of the forecast.